View of the Woodside estate.For the new feature for the Living section, called "A Day in the Life Of..." we follow Melanie Craft, the wife of Oracle software billionaire Larry Ellison.

Photo: Christina Koci Hernandez, The Chronicle

View of the Woodside estate.For the new feature for the Living...

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�Has anyone out there,� asked a SFGate reader, �heard anybody say anything nice about Larry?� Not so much, at least on SFGate in the wake of the Chronicle story on the multibillionaire�s $3 million property tax break on his now �functionally obsolete�

CHRISTINA KOCI HERNANDEZ/CHRONICLE View of the Woodside estate.For the new feature for the Living section, called "A Day in the Life Of..." we follow Melanie Craft, the wife of Oracle software billionaire Larry Ellison.
What does she do all day?

Larry Ellison, ranked 12th on the Forbes 500 list with a net worth of $25 billion, has bagged a $3 million tax break after arguing that his flamboyant Japanese-style estate in Woodside is functionally obsolete.

The chief executive officer of software giant Oracle Corp. will be paid from San Mateo County property taxes collected this year, which otherwise would have gone to schools, the county general fund and cities, among other things, Deputy Controller Kanchan Charan said. The hit to schools alone will be nearly $1.4 million.

Ellison's Octopus Holdings LP acquired the 23-acre site in May 1995 for $12 million and spent nine years constructing the lavish property, modeled on a Japanese emperor's 16th century country residence, according to the San Mateo assessment appeals board.

It consists of a nearly 8,000-square-foot main house with two wings, a guest home, three cottages and a gymnasium as well as a 5-acre man-made lake, two waterfalls and two bridges. Hundreds of mature cherry, maple and other trees were planted among nearly 1,000 redwoods, pines and oaks.

The assessor's office based its January 2005 valuation on so-called reproduction costs, the $166.3 million it should have cost to build, said Terry Flinn, deputy assessor-county clerk-recorder. Ultimately, after multiple delays and construction change orders, it ran more than $200 million.

Octopus Holdings, represented by San Francisco attorney William Bennett, asserted that it was worth only $64.7 million at that time, and in the two tax years since.

Why? How did Larry Ellison's palatial estate decline by more than 60 percent in value in a market where luxury homes are actually appreciating and single-family homes values in the county only decreased 6.3 percent in the last year, according to DataQuick Information Systems?

Oracle spokeswoman Deborah Lilienthal declined comment, and Bennett, of San Francisco law firm Bennett & Yee, didn't return a call from The Chronicle. But Ellison's appeal claimed the property suffered from "significant functional obsolescence" because there is a finite market for high-end luxury homes, limited appeal for 16th-century Japanese architecture and the "over improvements" and "excessive" landscaping are costly to maintain.

The board ultimately agreed, slicing the valuation by around $100 million for each of the last three years, for a tax savings of more than $3 million, Flinn said.

The largest proportion of San Mateo County property taxes, 45.1 percent, goes to school districts, followed by 21.5 percent for the county general fund, 16.7 percent to cities and 7.5 percent to redevelopment agencies. Woodside will lose about $78,000 from the $130,000 in property taxes it collected on the Mountain Home Road property during the past few years, Town Manager Susan George said. Nevertheless, she doesn't begrudge Ellison.

"He went through a process that was laid out by the law," she said. "It shouldn't make any difference how much money he has if the process was fair."

That said, she added: "We'll miss the money; we always have good things we can do with it."

"We have such an irrational property tax system, we rely on the growing housing market, and then when it levels off, there's an awful lot of schools and services hanging out there," he said.

Doug Heller, executive director of Santa Monica advocacy group Consumer Watchdog, said that Ellison's success in this case underscores an important issue in the current housing market: many lower- and middle-income people whose homes genuinely lost value don't know they can or don't know how to get their property values reassessed.

"Three million dollars to Larry Ellison is the equivalent of $300 to your average home owner, who's probably being over-assessed in the wake of this market, but doesn't know the ins and outs and have the advisers getting them the tax break," he said.